UBS profit jumps on wealth management boom

At investment bank, global banking revenue rose 68%

UBS Group AG posted better-than-expected second-quarter earnings from strong client activity in the world’s buoyant markets.

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On Tuesday, Switzerland’s biggest bank said net profit jumped to $2 billion from $1.23 billion a year earlier, outpacing analyst expectations of $1.34 billion. It said wealth clients traded more, pushing transaction revenues 16% higher from a year earlier, and added that recurring fees were 30% higher on their existing trades and products.

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At UBS’s investment bank, deal advice for mergers and acquisitions and other corporate transactions pushed global banking revenue 68% higher, helping to offset a 14% decline in market-trading income.

Troy, Michigan, USA - June 25, 2012: UBS in Troy, Michigan. Originally founded in 1854 in Switzerland, UBS is a global financial services firm with operations around the globe. (iStock)

UBS said markets revenue would have been flat but it took an additional $87 million hit the quarter from the late March default by family office Archegos Capital Management. UBS was one of about a half-dozen banks that lent to Archegos to take large, concentrated positions in stocks. The Swiss bank said in April that it had lost $861 million when exiting the trades, most of it booked in the first quarter.

On Tuesday, Chief Executive Ralph Hamers said wealth clients are investing more with the bank in private markets and in separately managed accounts, adding that they are also freeing up liquidity as a buffer against unforeseen events by refinancing assets and borrowing from the bank.

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He said momentum is on UBS’s side and that its strategic choices are paying off. The bank refocused around wealth management a decade ago and pared back its investment bank. It has been less in the limelight than its smaller domestic rival, Credit Suisse Group AG, which lost more than $5 billion from the Archegos affair this year.